Food price increases expected to slow

Tuesday, December 13, 2011

by SUSAN MANN

A report by two University of Guelph economists predicting a modest two per cent increase in food prices next year has generated a lot of media attention.

Reports on the Food Price Index by Prof. Sylvan Charlebois, associate dean of research and graduate studies at Guelph’s College of Management Economics, and Prof. Francis Tapon of the economics department have appeared in several major Canadian newspapers, news magazines and on television and radio stations.

The two economists say competition in food retailing is one of the major factors keeping food prices down next year. They’re predicting increases of about three per cent in meat prices, one to three per cent in vegetable costs, three per cent for baked goods and two per cent for restaurant meals.

That’s down considerably from this past year with its overall increase of five to seven per cent in food prices, including increases of 11 per cent for dairy and eggs, 10 per cent for fresh vegetables, seven per cent for baked goods and five per cent for meat.

This past year’s significant increase in retail prices was due primarily to considerable increases in input costs, Tapon says in a press release. For next year, input prices won’t have as much of an impact as they did in 2011.

Tapon and Charlebois say their predictions are based on several factors, including climate, economic risks, energy costs, currencies and trade, plus Canada’s food distribution and retail landscape. They also considered domestic fundamentals, such as consumer debt and inflation. Of all the factors, economic and climate are the most concerning, they note.

Tapon says they can’t remember a period with so much uncertainty in the economic outlook and no obvious easy way out. “Food prices will reflect this uncertainty,” he notes.

Climate is the most unpredictable driver of food prices, explains Charlebois, noting it’s an important factor. BF